How to Open a Demat account? Online and Offline Process for Opening a Demat Account

With the advent of advanced technology, opening a demat account has become very easy. A trader or investor can open a demat account both online and offline.

For the online process, all you need is a laptop or desktop with good internet connection.

But before talking about the online process, you must select a reliable stockbroker who provides you good services.

Demat Account Opening Offline

Following are few steps which will help you to open Demat account faster:

• You will be provided a form to open an account by a stockbroker.

• You can also download the form from the stockbroker.

• Get the form printed and enter basic information like name, address, mobile number, and applicant's signature.

• The employees of the stockbroker chosen by you will provide you with the demat account agreement, details of payment and charges to be paid, Power of Attorney document.

• You are advised to read, verify and sign all the documents before handing them over to the broker.

• You have to pay an account opening fee which is a one time cost.

• However, many brokers like IIFL, Motilal Oswal, Angel Broking offer free demat account facility.

• In addition, there will be annual maintenance charges levied on your account. Check these details before going ahead with account opening.

• Once the document is validated by the stockbroker, it will be verified by an authorized person through mail or through an online call by Whatsapp or Skype.

• After taking care of all the above documents and procedures, you will be given a demat account number by the stockbroker which will act as the identifier for your account.

• For stockbroker records, you will also be assigned the Client ID.

• You will also be provided with the login credentials of various trading platforms like mobile trading app, terminal software etc which you will use to trade in the stock market.

Demat Account Opening Online

As already discussed, you can open a demat account online by following the following procedure:

• For this, you have to visit the website of a stockbroker and click on the “Open a Demat Account” button.

• Once the new window opens, you have to enter basic information like name, mobile number etc.

• Once the information is filled, you will have to fill other details like PAN card details, Aadhar card number for the next process.

• After this, you have to upload the scanned copy of all the documents to open the demat account.

• Then select the segment in which you want to trade and submit the account opening fee.

• Once the verification process is completed, you will receive the login ID and password on your registered email ID.

Documents for Demat Account

In order to open your demat account with a regulated depository participant, you need to submit the following documents to the selected stockbroker:

• Pan card ,
• Address proof (any of the following)
• Aadhar Card ,
• Passport ,
• Ration card ,
• Driving license ,
• Voter ID,
• Bank statement verified,
• Electricity bill,
• Rental agreement,
• College id card,
• Hostel addresses (for students) where the college should be affiliated to universities and education boards like ICAI, ICWAI, Bar Council.
• Passport size photo,
• Bank account check canceled in your name
• Income tax return
• Along with these documents, you will need to sign an account opening form, as well as a Power of Attorney (POA). Make sure you have a copy. It is the professional responsibility of the stockbroker to share a copy with you.
• You will have to show the original documents to the employee of the stockbroker for verification and then give signed copies of these documents.

Demat Account Rules in India

To make sure you don't make decisions based on half-knowledge, it's important to be clear about a few basics. With the basics of a demat account clear, you have a base to understand the rules of demat account.

There are two categories of Demat Account Rules:

Rules for opening Demat account:

SEBI has mandated the requirement of certain documents to streamline the process and ensure that correct information is furnished. Most of these are issued by the government. The documents required for demat account are:

• Well filled application form
• Address proof
• Pan card
• Bank statement (for linking bank account)
• After handing over these documents to the broker of your choice, your demat account will be activated.

Rules for closing demat account:

If you want to quit trading in the stock market, you will want to close the demat account.

The Demat Account Rules for closing the account are as follows:

• Fill a form to close the demat account.
• The required information is – DP ID and Customer ID, the current information should be entered in the records.
• Mention the reason for closing your account.
• If there is any balance in the demat account, it will get transferred to the account details provided.
• In 7-10 business days, the account will be deactivated.

Note: In case of any outstanding, clear the demat account before deactivating it.

BSDA Demat Account Rules

BSDA stands for Basic Service Demat Account. A mandatory condition for taking a BSDA account is that you cannot keep more than 2,00,000.

The rules for BSDA Demat Account are as follows:

• Only one BSDA Demat account is allowed in all the depositories.

• The AMC structure for BSDA Demat account is dependent on the account holding –

1. Less than 50,000: There is no AMC.
2. ₹ 50,000 – 2,00,000: AMC is up to ₹ 100.
3. Above 2,00,000: Normal AMC is levied.

• The increase of this amount even for one time will attract appropriate charges.

• The transaction details for three months are sent to the BO even if the trader has done only one transaction.

• Transactions of one year's holding are sent to the BO in physical or electronic form, as chosen by him.

• Electronic statements are free of charge and there should be at least two in case of physical statements. Cannot exceed ₹25 for a single statement if more than a pre-determined number of stockbrokers for a physical statement.

The following points were added to the list to reduce the charges for DP:

• Zero Balance and Zero Transaction Account – A physical statement of holding is required to be sent annually to the BO.

• Accounts that maintain zero balance during the year – The broker is required to send an account holding statement annually, but it is not mandatory to mail the transaction reports.

• Credit but no transaction account – A statement of holding is required to be sent.

Demat Account Rules for Minor

To own the shares of a company, you must have a demat account. When the account holder is still a minor, there are certain rules to follow:

• Only natural guardian (parent) or a court appointed guardian can open an account in his/her name.

• As soon as the minor turns 18, the operation of the account is stopped. Now, open a new account and the previous holdings are transferred to this account.

• The old account can be continued only after a fresh agreement is signed between the minor and the depository.

• The form for a minor demat account is similar, but for verification, two KYC forms are filled – one of the minor (signed by the guardian) and the other of the guardian.

• The documents remain the same. The guardian completes the documents and it is mandatory to submit the proof of date of birth of the minor.

• No trading account is allowed to link to a minor demat account.

• No minor can be a joint holder.

• Shares in a minor demat account are usually gifts.

Demat account SEBI guidelines

A lot of guidelines were announced by SEBI to make the Indian stock market a safe haven. They are as follows:

• The charges on the demat account are pre-determined to avoid overcharging by the stockbroker.

• Your verification as an account holder is mandatory.

• It is mandatory to link your PAN card with the demat account.

• No minimum amount is required to maintain the Demat account.

• The account holder has to mandatorily pay an annual fee and a percentage of his trading as brokerage.

SEBI Guidelines for Demat Account Charges

The demat account rules for charges on demat account are as follows:

• No charges are levied on the Demat account.

• Maintenance charges are applicable. These charges vary from broker to broker and in layman's terms, are known as AMC or Annual Maintenance Charges.

• In addition, every sale transaction and every dematerialization and rematerialisation of your securities will incur charges.

• When you decide to close your demat account, you will not have to spend a single penny except for any outstanding balance.

NRI Demat Account Rules

Yes, you read that right. Demat account holders can also be NRIs. But then it is not easy for them to be account holders in demat accounts in India. They have to stick to the rules of demat account for NRIs.

These rules are as follows:

• NRIs cannot trade in commodity or currency segments. NRIs can trade in PSU Bonds, ETFs, Government Securities, Mutual Funds and Cash Delivery but commodity or currency segment is not allowed for trading.

• NRIs are not allowed to own more than 5% of the stocks listed in the Indian market indices.

• Intraday trading and short selling of stocks are not allowed for NRI demat accounts.

• NRIs should take care of the documentation process and formalities.

• If NRIs want to hold repatriable and non-repatriable products, they will have to keep them in separate demat accounts.

• For PIS (Portfolio Investment Scheme), they should approach an authorized dealer only.

• When NRIs return to India and become residents, they should approach the nearest branch of the broker who has the demat account and inform them.

• Upon intimation, the transfer of financial securities will begin by opening a simple demat account.